Prenuptial Agreement

A prenuptial agreement, called a premarital agreement in most statutes and an antenuptial agreement in some older sources and federal regulations, is a contract made between prospective spouses that becomes effective on marriage and governs their property and support rights. Its usual subjects are which assets stay separate, how property acquired during the marriage will be characterized, whether either spouse may claim support if the marriage ends, and what each receives at the other's death. It is a state-law instrument, so its enforceability, formalities and permitted subjects are set by the law of the state whose courts would enforce it, and those rules vary more than most people expect.

Start with the limit that catches people, because it is the one a prenup is most often drafted to address. A prenuptial agreement cannot waive a spouse's survivor rights in an employer retirement plan governed by federal law. Treasury Regulation section 1.401(a)-20 puts the question and answers it in two words. The question is whether consent contained in an antenuptial agreement satisfies the spousal consent requirements of sections 401(a)(11) and 417. The answer, at Q&A-28, is: "No. An agreement entered into prior to marriage does not satisfy the applicable consent requirements, even if the agreement is executed within the applicable election period."

The reason is structural rather than technical. Section 205(c)(2)(A) of ERISA, codified at 29 USC 1055(c)(2)(A), requires that "the spouse of the participant consents in writing," that the consent designate a beneficiary or a form of benefit that cannot be changed without further spousal consent, and that the consent acknowledge its effect and be "witnessed by a plan representative or a notary public." A person who has not yet married is not a spouse, so there is nobody with the capacity to give that consent when a prenup is signed, and the witnessing formality is a second thing a prenup will not have satisfied.

The actionable consequence is a step, not a conclusion, and it is worth keeping two ideas separate here. The step is that after the wedding the new spouse signs the plan's own spousal consent form, witnessed as the statute requires, and the plan administrator has that form. That is what makes the intended outcome actually happen. What the prenup can still do is bind the participant contractually, by promising to designate particular beneficiaries and to indemnify the estate or the intended recipients if they do not. That is a state-law promise enforceable against the participant or their estate, and it is not the plan-law waiver. Collapsing the two produces one of two wrong conclusions: either that a prenup handles retirement accounts, which it does not, or that a prenup is useless for them, which is also wrong.

An individual retirement account is a different case, and this is the seam with state marital property law. ERISA section 205 does not reach IRAs, so there is no federal spousal consent requirement for an IRA beneficiary designation, and no qualified domestic relations order is used to divide one either. In a community property state a spouse may nonetheless have a state-law claim to half. So "your spouse must consent" is right for a 401(k) and wrong for an IRA, and "your spouse has no rights" is right for an IRA under federal law and wrong in Texas or California. Any single sentence covering both account types is wrong about one of them.

A spousal consent binds only the spouse who gave it. The closing sentence of 29 USC 1055(c)(2) provides that any consent by a spouse "shall be effective only with respect to such spouse." A consent obtained during a first marriage does nothing in a second one, which matters because the participant may not think of the designation as unfinished business after remarrying.

Child support cannot be bargained away, and the wording of the limit is precise. Section 3(b) of the Uniform Premarital Agreement Act, enacted for example at California Family Code section 1612(b), provides that "the right of a child to support may not be adversely affected by a premarital agreement." Note the word adversely. An agreement can promise a child more than the law would require. What it cannot do is reduce or waive what the law provides, and a court asked to enforce such a provision will not.

Enforceability is where the state-to-state variation is largest, and California's enactment shows how far a state can go. The base test in California Family Code section 1615(a) is that an agreement is unenforceable if the party resisting it proves either that they did not execute it voluntarily, or that it was unconscionable when executed and they were not given a fair, reasonable and full disclosure of the other party's property and obligations, did not expressly waive disclosure in writing, and could not reasonably have had adequate knowledge of it. Section 1615(c) then reverses the burden on voluntariness: an agreement is deemed not to have been executed voluntarily unless the court finds that the party against whom enforcement is sought was represented by independent legal counsel, or expressly waived such representation in a separate writing after being advised to obtain it at least seven days before signing, and had "not less than seven calendar days" between being first presented with the final agreement and signing it. Those additions are California's, not the uniform act's, and they illustrate that in some states independent counsel and a waiting period function as conditions of enforceability rather than as good practice.

Two different unconscionability clocks can run in the same statute, and conflating them is the easiest error available on this subject. Under the California provisions, property terms are tested for unconscionability as of the time of execution. A spousal support provision, under section 1612(c), is unenforceable if the party was not represented by independent counsel when it was signed, "or if the provision regarding spousal support is unconscionable at the time of enforcement." That second test is applied years or decades later, on facts nobody could have known, and the statute adds that an otherwise unenforceable provision does not become enforceable merely because the party had counsel. So a support waiver that was scrupulously fair when signed can still fail when it is invoked.

The uniform acts are models, and a model act has no force until a legislature enacts it. There are two: the Uniform Premarital Agreement Act of 1983 and the Uniform Premarital and Marital Agreements Act of 2012, which is a different act with different provisions. States have adopted one, the other with amendments, or neither, in which case their own case law governs. That is why enforceability is a question about a specific state rather than about prenuptial agreements generally, and why an agreement drafted for a couple who may later move deserves attention to the possibility.

In practice the sequence runs like this. Each party discloses their assets, debts and income in writing, because a disclosure failure is one of the two routes to unenforceability in most states. Each is advised to obtain their own lawyer, and in some states the absence of independent counsel independently undermines the agreement or specific provisions in it. Terms are negotiated and a final version is prepared. A waiting period runs where the state imposes one, and it runs from presentation of the final agreement, so a late substantive change restarts the clock. The agreement is signed and becomes effective on the marriage. Then, and this is the step most often left undone, the parties carry out whatever the agreement contemplated: retitling accounts, signing the plan's own spousal consent forms after the wedding, updating beneficiary designations, and drafting the wills or trusts the agreement requires.

A hypothetical example of the retirement plan gap. Jordan has two children from a first marriage and a 401(k) worth $600,000. Before marrying Sam, they sign a prenuptial agreement stating that the 401(k) will pass to Jordan's children. Jordan updates the plan's beneficiary form to name the children. Jordan dies. Sam has never signed the plan's spousal consent, and under federal plan law a married participant's death benefit belongs to the surviving spouse unless the spouse consented in the required form. The plan pays Sam. What the children may have is a contract claim against Jordan's estate under the agreement, which is a different, slower and less certain thing than receiving the account. The fix was one form, signed after the wedding, witnessed as required, and filed with the plan administrator.

A prenup does not override a beneficiary designation on its own. The form on file controls the account, whatever a separate contract says. An agreement stating who receives an account, sitting alongside a designation naming somebody else, produces a dispute rather than an outcome. Updating the forms is not administrative tidying; it is the step that makes the agreement operate.

It is as much a death document as a divorce document. California Family Code section 1612(a) expressly permits terms about the disposition of property on death, the making of a will or trust to carry out the agreement's provisions, and the ownership rights in and disposition of a life insurance death benefit. This is why prenuptial agreements matter most in a remarriage where each spouse has children from an earlier relationship, and it is the use case consumer writing covers least. One related limit belongs to state law rather than to the agreement: a surviving spouse's elective or forced share of an estate can generally be waived, but the requirements for waiving it are set by each state and are not uniform, so it is a question to raise about the specific state rather than to assume.

Pros

• Settles in advance which assets stay separate, which is particularly valuable for a business, an inherited asset, or property brought into a second marriage.
• Protects children from a previous relationship, by committing each spouse to leave them specified assets.
• Forces a full financial disclosure between two people before they marry, which is useful in itself.
• Can address death as well as divorce, including wills, trusts and life insurance.
• Replaces a default set of state rules that neither person chose with terms both of them negotiated.

Cons

• Cannot waive survivor rights in an employer retirement plan, so the plan's own consent form still has to be signed after the wedding.
• Cannot reduce a child's right to support.
• Enforceability is a state-law question, and the standards differ enough that an agreement valid in one state may be attacked in another.
• In some states a spousal support waiver is judged for fairness at the time it is invoked rather than when it was signed, so it can fail years later on facts nobody could have anticipated.
• Requires separate lawyers, real disclosure and a waiting period before the wedding, which is a difficult conversation on a fixed deadline.
• Achieves nothing on its own. The retitling, forms and estate documents it contemplates still have to be executed.